Meet Alrosa, Russia’s major diamond mining company. Alrosa has been striving for many years to become the world’s #1 diamond producer and it looks like they are there. They are producing the highest volume of diamonds but not the most valuable per carat yield.
According to rough diamond production, import and export figures for 2014 recently released by the Kimberley Process (KP), the Russian Federation mined 38.3 million carats of diamonds worth $3.73 billion in 2014, compared with Botswana, which mined 24.7 million carats worth $3.65 billion.
While Russia’s larger quantity of goods ultimately added up to a higher value, Botswana still mined more valuable stones on average. According to the KP statistics, the value per carat of Russia’s diamonds was $97.47 while Botswana’s came in at $147.87.
Edahn Golan, a diamond industry analyst, recently wrote about the differences between Alrosa and DeBeers in his blog post published August 27, 2015. He believes that part of the reason for Russia’s rise to the top is directly related to the differences between the two companies.
Alrosa, Golan explained, is backed by Gokhran, the Russian government run precious metals and gems repository. Alrosa can keep mining diamonds and selling them to Gokhran even when global demand slows down.
De Beers, on the other hand, is owned by Anglo American, a publicly traded mining company. Beholden to shareholders, De Beers reduces production to cut costs when its clients aren’t buying as much rough.
Together, Russia and Botswana account for approximately half of world diamond supply, in both volume and value terms.
Moving down the KP’s list, the world’s third largest diamond producer in volume terms is the Democratic Republic of Congo. However, the DRC’s value of its diamond lags far behind the world’s fourth largest producer, Canada.
In 2014, the DRC mined 15.7 million carats of goods valued at $136.5 million. The average value per carat was $8.72.
Canada, on the other hand, produced 12 million carats of diamonds worth $2 billion. The average value per carat was much higher at $166.78.
The world’s fifth largest producer in volume terms was Australia, which mined 9.3 million carats of diamonds worth $304.3 million. The average value per carat there was $32.76.
The last two countries that contributed significantly to the world’s diamond supply in 2014, were Angola (8.8 million carats worth $1.32 billion, average value per carat of $149.86) and South Africa (7.4 million carats worth $1.22 billion, average value per carat of $164.76), according to KP’s statistics.
At one point in the 1980’s, De Beers single-handedly controlled 85% of the worlds diamond supply. In 1954 the first primary diamondiferous kimberlite was discovered in what is now the Sakha Republic of Russia, an autonomous republic in Northeastern Siberia, a couple hundred kilometers south of the Arctic Circle. By the 1960’s, Russia had 4 major diamond mines in production, producing a considerable amount of global supply. Soviet diamonds where characterized as lower quality diamonds than those being mined by De Beers in Africa, although the quantity of diamonds being recovered was much higher.
The high quantity of Soviet diamond production posed a threat to the De Beers cartel, and in 1963 De Beers convinced the USSR to sell through the De Beers distribution company. This arrangement quickly became extremely costly to De Beers as the Soviet mines produced even greater quantity and even lower quality diamonds than initially anticipated. This prompted De Beers to market the lower quality diamonds to a new middle class American market, in an effort to absorb the overwhelming new supply. After nearly 40 years, the Russian’s business relationship with De Beers began deteriorating during the collapse of the USSR in the 1990’s, and by the 2000’s, European antitrust pressures left the two completely separated, which eventually lead to the restructuring of the De Beers monopolistic model.
Alrosa is planning to increase production to 41 million carats by 2023.